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International information flow and market quality

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  • Zhang, Jiang

Abstract

Does the informational interdependence among countries affect market quality? Guided by the theoretical literature, this paper examines disruptions to international information flow as a source of financial market frictions. Using nonoverlapping holidays as a novel identification method, I find that disruptions to foreign information inflow deteriorate domestic market liquidity and fairness. I show that market quality worsens through both the informational sensitivity and the abnormal trading channels. Additional analyses indicate that stocks with lower liquidity and higher volatility are prone to more manipulative trading during information disruptions. Furthermore, a stock exchange upgrade weakens the abnormal trading channel. These findings suggest that international information flow is important to financial market quality.

Suggested Citation

  • Zhang, Jiang, 2025. "International information flow and market quality," Journal of Banking & Finance, Elsevier, vol. 173(C).
    • Handle: RePEc:eee:jbfina:v:173:y:2025:i:c:s0378426625000408
    DOI: 10.1016/j.jbankfin.2025.107420
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    More about this item

    Keywords

    International information flow; Fairness; Liquidity; Market manipulation; Information asymmetry;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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